Tax planning? Invest in long-term instruments

Higher standards of living, loan repayments, responsibilities towards children (like education) and a host of other short-to medium-term obligations manage to distract one from saving for their retirement, critical for the much-wanted peaceful twilight years.

Tax planning? Invest in long-term instruments

According to a recent survey by HSBC, (The future of retirement -- Its time to prepare) approximately 58 per cent of the respondents in India were not sure of how their retirement income will look like.

It was also observed that one of the reasons for the unpreparedness was the lack of understanding about long-term finances vis-a-vis the short-term.

India is reported to have a higher savings ratio as compared to other countries.

However, the survey revealed that the motive for saving is mostly for reasons other than retirement.

Tax planning? Invest in long-term instruments

A PPF account is a must-have in one's portfolio that can be easily carried on for a total period of 30 years (including the permissible extensions in blocks of five years after the initial 15-year period).

A slow start to a PPF account by contributing Rs 10,000 annually and raising the contributions after every decade to Rs 50,000 and Rs 100,000 each year can yield great results.

Some projections show that the above strategy can help the individual accumulate close to Rs 28 lakhs (Rs 2.8 million) at the end of 25 years at a conservative rate of 7.5 per cent per annum.

Tax planning? Invest in long-term instruments

While the above options hold good for people planning for their retirement corpus, the SCSS is an option for the retired investor.

Tax-benefit for investments in SCSS was introduced not very long back. Although the income earned from this scheme is taxable, the same carries sovereign guarantee and security.

Post retirement, investing for tax-saving is really troublesome as the retiree would not want to part away with liquidity just to save tax. SCSS fills this gap by providing the right blend of regular returns and tax benefits on investments.